• Mark Watson-Mitchell

Northcoders Group – my price aim is higher than its brokers

I wish I was clever like you Brian!


If I was, then perhaps, I would be into computer coding.


I am not, but if I was then I would not need to know about today’s Profile company.


What is coding?


It is the process of creating software, virtual reality, artificial intelligence, websites, games and much more.


The programs on our computers, the apps on our phones, internet media sites, including those of Master Investor are all constructed with code.


Just like I don’t understand anything technical about computers they don’t understand words.

Programming languages like JavaScript were created to communicate with computers.


Those languages are made up of words and numbers, which when arranged in order, they form a set of instructions. It is the coding in those languages that tells our computers what to do.


So how do I learn about coding?


You do not have to be exceptionally good at maths to get into coding, but it probably helps.


But you do need to be able to think logically in building websites and apps.


That is just where the Northcoders Group (LON:CODE) comes into play.


This Manchester-based company is an independent provider of training programmes for software coding. For both private individuals and corporate customers it offers a range of training and software development solutions.


How and where?


The company offers ‘bootcamp’ training courses, government funded apprenticeships, bespoke training courses and software development solutions.


It provides its services in person, at one of the group’s regional office ‘hubs’ currently located in Manchester, Leeds and recently Newcastle. It is also available digitally through its online platform.


The award-winning group’s coding schools offer courses for absolute beginners and junior software developers to help them kick-start and advance their coding careers from across the UK.


It also has a team of specialist software developers that help businesses solve education problems with technical solutions.


What does it cost?


To attend one of the coding bootcamps the total cost is £7,200.


The main 13-week coding bootcamp costs £6,250, while the Introduction Week costs £950.


If, after Introduction Week, attendees don't want to progress onto the core bootcamp, they receive their fees back in full, with no quibble.


Impressively, the company’s brand is supported by over 250 companies who have hired a Northcoder graduate, many of those hiring partners have repeatedly hired the group’s graduates.


As a result, approximately 95% of students have to date found employment within 44 days of completing a company training course.


Placing on AIM last July


In late July last year, the company raised £3.5m gross by way of a placing and subscription of 1,944,444 new ordinary shares at a price of 180p each.


That capitalised the company at £12.5m, with 6,944,445 shares in issue, with the Directors holding 38.15% of the equity.


Amati Global Investors now hold 14.4% of the equity, while Vela Technologies has a 4.91% stake.


The new funds, net of float expenses, were to be used to boost up the company’s growth strategy, enabling it to roll out its scalable hybrid delivery model geographically with an additional hub in Birmingham and the opening of two other regional hubs in 2022.


Initial target areas for new hubs include Birmingham, Liverpool and Sheffield with the ultimate goal of creating a substantial network of Northcoders hubs across the UK.


In addition to geographical expansion, there is the opportunity to further develop the corporate solutions division which provides software development solutions to meet the specific requirements of corporate customers.


Trading Update


On Tuesday of this week the group declared a Trading Update for the year to end December 2021.


It stated that it had delivered a strong result for the year and that its expansion plans are progressing through the opening of more hubs.


The full results will be published on 26 April and they should be better than market expectations.


Broker’s View


Analysts Nick Spoliar and Matthew Davis at brokers WH Ireland are estimating that group revenues for 2021 will be £3.0m (£1.3m) while pre-tax profits should be £0.1m (£0.7m loss), with 2.5p of earnings per share (loss of 5.0p).


However, their figures for this year and next look a lot more exciting.


For 2022 and 2023 they go for revenues of £6.5m then £10.5m, with profits of £0.8m then £3.2m, worth 9.5p and 36.9p in earnings respectively.


My View

In its own words this company: is a balanced business model; it has market leading services and a strong brand; with a proven, flexible and scalable platform; having strong growth drivers; and a clear growth strategy.


Well, what more can I say?


I note that the brokers have a 320p a share ‘fair value’ assessment on the shares, which after this week’s news actually peaked at 319.8p.


Last night they closed at 296p, which is just 8 times next year’s earnings.


Considering its previously stated attributes, I am even more bullish than the brokers and reckon that these shares could hit 500p before they get anywhere close to their Admission price.


I am now setting a Target Price of 370p for 2022.

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